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Name:
Class:
Date:
chapter 19
Indicate whether the statement is true or false.
1. Skimming pricing strategies are also known as “market-plus pricing.”
a.
True
b.
False
2. Everyday low pricing is a pricing strategy that relies on short-term cost-cutting tactics such as coupons and
rebates.
a.
True
b.
False
3. Tiffany, Rolex, Gucci, and Prada represent exclusivity, meaning their prices are mostly inelastic.
a.
True
b.
False
4. Rebates are usually granted to customers by retailers.
a.
True
b.
False
5. Marketers implement leader pricing policies to avoid violating maximum-markup regulations and to earn a
maximum return on promotional sales.
a.
True
b.
False
6. When the list price of a product is discounted by the value of a used product that is turned in at the time of
sale, the transaction is called a sale with a trade-in.
a.
True
b.
False
7. A low price is a sure sell because the demand for many goods is highly elastic.
a.
True
b.
False
8. Trade-ins are seldom used in sales of durable goods.
a.
True
b.
False
9. Large companies set up profit centers as a control device in their newly decentralized operation.
a.
True
b.
False
10. Setting prices is a one-time decision for most products in most companies.
a.
True
b.
False
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11. List price is the amount the consumer actually pays for a product.
a.
True
b.
False
12. A grocery store places tags on shelves just below the products that list the product name, UPC number, a
store code, and the regular price of the product. This regular price is called the market price.
a.
True
b.
False
13. Firms that price their products differently for online purchases face the risk of cannibalization.
a.
True
b.
False
14. One-price policies are more likely to be applied in marketing programs based on individual bargaining.
a.
True
b.
False
15. A leader merchandise is a product offered by retailers to customers at less than cost to attract them to stores.
a.
True
b.
False
16. A dual pricing strategy provides more flexibility to set prices with changing market conditions than a
market-differentiated pricing strategy.
a.
True
b.
False
17. The government monitors transfer pricing closely because it is an easy way for companies to avoid taxes on
profits.
a.
True
b.
False
18. Most buyers prefer basing-point pricing policies compared to other policies used by sellers to handle
transportation costs.
a.
True
b.
False
19. The global status of an industry will influence a firm’s pricing strategies in international markets.
a.
True
b.
False
20. Most price structures are built around list prices.
a.
True
b.
False
21. Transfer pricing typically is a simple and standardized process in most organizations.
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a.
True
b.
False
22. Every online marketer is inherently a global marketer who must understand the internal and external
conditions that affect global pricing strategies.
a.
True
b.
False
23. Since many firms begin penetration pricing with the intention of increasing prices in the future, success
depends on generating numerous trial purchases.
a.
True
b.
False
24. A negative cash discount is an attempt by sellers to improve their liquidity positions, reduce their bad-debt
losses, and cut collection expenses.
a.
True
b.
False
25. Zone pricing completely eliminates phantom freight.
a.
True
b.
False
26. Auctions such as eBay are considered the purest form of negotiating prices.
a.
True
b.
False
27. Odd pricing originated as a way to force clerks to make change, thus serving as a cash-control device.
a.
True
b.
False
28. Brands which are seeking to be associated with prestige and exclusivity often set higher prices.
a.
True
b.
False
29. Most companies set prices using competitive pricing as their primary pricing strategy.
a.
True
b.
False
30. The demand for private-label goods will be low in a tough economy.
a.
True
b.
False
31. A skimming pricing strategy is commonly used as a market entry price for distinctive goods and services
with high initial competition.
a.
True
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b.
False
32. Controlling demand for a new product through the skimming strategy could save a company from
dissatisfied customers by matching supply to the demand.
a.
True
b.
False
33. Citibank offers an opportunity for credit card customers to transfer balances from competitive cards and pay
low financing for a six-month period. After the introductory period is over, the rate will increase to the normal
interest rate. Citibank’s strategy is to penetrate the market and obtain increased market share.
a.
True
b.
False
34. Cannibalization occurs when companies offer their products in multiple retail channels such as drug stores,
convenience stores, grocery stores and discount stores.
a.
True
b.
False
35. Everyday low pricing strategies are an attempt to remove pricing as a significant part of the marketing mix.
a.
True
b.
False
36. Bundle pricing is more prevalent in the telecommunications industry compared to other industries.
a.
True
b.
False
37. Lysol sanitizing wipes entered the market at a low sales price and was supported by heavy couponing. As
the initial trial period passed, the pricing slowly rose and the couponing became more infrequent. This activity
is an example of penetration pricing.
a.
True
b.
False
38. The Internet has provided more power to customers to control the prices of goods and services.
a.
True
b.
False
39. Negotiated pricing policies seek to eliminate the economic waste that would result from obtaining and
processing bids for relatively minor purchases.
a.
True
b.
False
40. A standard worldwide pricing policy is more likely to succeed in foreign markets with high marketing costs.
a.
True
b.
False
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41. Skimming is an effective strategy to use when products are distinctive or have little competition.
a.
True
b.
False
42. Step outs occur when a company refuses to participate in price escalation between competitors.
a.
True
b.
False
43. Companies are prohibited from charging a transfer price when moving goods between profit centers.
a.
True
b.
False
44. Auctions are the most complicated form of negotiated pricing.
a.
True
b.
False
45. Bots are search programs that hunt the Web for a specific vendor and then print out a list of products and
their prices at that source.
a.
True
b.
False
46. Penetration pricing is likely to be utilized when demand for a good or service is highly inelastic.
a.
True
b.
False
47. Firms using a competitive pricing strategy try to reduce the emphasis on price competition by matching
other firms' prices and concentrating their own marketing efforts on the product, distribution, and promotion
elements of the marketing mix.
a.
True
b.
False
48. Most businesses slowly change the amounts they charge customers, even when they clearly recognize strong
demand.
a.
True
b.
False
49. Zone pricing helps sellers compete in distant markets.
a.
True
b.
False
50. A pricing policy is a general guideline that reflects marketing objectives and influences specific pricing
decisions.
a.
True
b.
False
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51. In the absence of other cues, price is an important indicator of a product’s quality to prospective purchasers.
a.
True
b.
False
52. A manufacturer’s list price must incorporate the costs incurred by channel members in performing required
marketing functions and expected profit margins for each member.
a.
True
b.
False
53. A price of $ 9.97 is less likely to appeal to customers than $ 9.95 or $ 9.99.
a.
True
b.
False
54. Increased competition in the marketplace forces an innovative company to bring down the price of a product
even lower than its eventual level under a nonsequential skimming procedure.
a.
True
b.
False
55. Business and government purchasers often legally enter into contracts with favored suppliers instead of
using competitive bidding.
a.
True
b.
False
56. Buyers of a particular new car model are being offered zero-percent financing. This is an example of a
promotional allowance.
a.
True
b.
False
57. Product line pricing is the practice of marketing merchandise at variable prices negotiated between buyer
and seller.
a.
True
b.
False
58. While price offers a dramatic means of achieving competitive advantage, it is the most difficult marketing
variable for competitors to match.
a.
True
b.
False
59. Unit pricing began to be widely used during the late 1960s to make price comparisons more convenient
while comparing the true prices of products packaged in different sizes.
a.
True
b.
False
60. A skimming pricing strategy is ineffective in marketing higher-end goods.
a.
True
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b.
False
61. Marketers who have adopted a product-line pricing strategy have one major advantage in that they have no
difficulty making price changes on individual items.
a.
True
b.
False
62. Many government and organizational procurement departments do not pay set prices for their purchases.
a.
True
b.
False
63. Responding to the weakening of their control over prices brought about by e-commerce, marketers have
begun to bundle a host of additional goods and services with the tangible products they offer their customers.
a.
True
b.
False
64. A functional discount is a payment to a channel member or a buyer for performing marketing functions.
a.
True
b.
False
65. An internal transfer price is the price for moving goods between profit centers in large-scale organizations.
a.
True
b.
False
66. Marketers today are more savvy about integrating marketing channels and standardizing pricing across
channels.
a.
True
b.
False
67. Penetration pricing is often used in a market in which a new product is likely to face strong competition
when introduced.
a.
True
b.
False
68. Cumulative quantity discounts are one-time reductions in list prices.
a.
True
b.
False
69. Price is an important indicator of quality for many consumers.
a.
True
b.
False
70. In an attempt to simplify pricing structures, sellers will quote uniform prices that, in effect, spread the total
shipping costs across all the customers.
a.
True
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b.
False
71. Exporters who implement dual pricing policies can make profit by selling any product in international
markets.
a.
True
b.
False
72. In an FOB pricing policy, the seller pays all freight charges to transport the product from the manufacturer’s
loading dock.
a.
True
b.
False
73. The amount by which the average transportation charge exceeds the actual cost of shipping to a particular
destination under postage stamp pricing is called phantom freight.
a.
True
b.
False
74. Flexible cost-plus global pricing allows companies to grant discounts or change prices according to shifts in
the competitive environment or fluctuations in the international exchange rates.
a.
True
b.
False
75. Buyers and sellers often set purchase terms through negotiated contracts for projects that require extensive
research and development.
a.
True
b.
False
76. Exporters often set standard worldwide prices, regardless of their target markets.
a.
True
b.
False
77. A private-label product priced below the lower limit can be regarded as too cheap by potential customers.
a.
True
b.
False
78. Cumulative quantity discounts tend to bind customers to a single supply source.
a.
True
b.
False
79. Retailers such as Walmart achieve everyday low pricing by negotiating better prices from suppliers and by
cutting their own costs.
a.
True
b.
False
80. Few businesses want the distinction of being the first to charge higher prices.
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a.
True
b.
False
81. Almost half of all eBay transactions occur at fixed prices.
a.
True
b.
False
82. Maintaining an artificially low price for a period of time leads consumers to expect it as a customary feature
of the product.
a.
True
b.
False
83. Exporters who adopt market-differentiated pricing seldom change the price of their products.
a.
True
b.
False
84. Retailers achieve opening price point by pricing a quality private-label product above those of
manufacturer’s brands.
a.
True
b.
False
85. Basing-point pricing policy always calculates the freight charges from the point or location from which the
goods are actually shipped.
a.
True
b.
False
86. Every online marketer is inherently a global marketer.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
87. A manufacturer of tablet computers has designed a unique new product that can network with satellites to
access streaming video and television channels. This device does not need a Wi-Fi connection and can be
accessed anywhere in the world by logging onto the site. Besides serving as a portable computer, this device
bypasses the need for a consumer to purchase cable or personal satellite dish access. Which approach to pricing
makes the most sense for the company to use first?
a.
set the price extremely high until competing products are developed
b.
set the price to match the manufacturing of the device under a private label
c.
set the price extremely low in order to capture more of the current market share
d.
set the price to match other computer and television devices sold by competitors
e.
set the price extremely low in order for consumers to purchase it without needing a coupon
88. A step out is a pricing practice in which a firm:
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a.
maintains a high price for a product throughout its life cycle.
b.
offers an extremely low price on a single product purchase to reach the mass market quickly and
capture a large market share.
c.
markets a product at a low price compared to competitive offerings to secure market acceptance.
d.
raises the price of a product and then waits to see if others follow suit.
89. A firm that permits variable prices for different customers is adopting _____.
a.
promotional pricing
b.
price flexibility
c.
odd pricing
d.
product-line pricing
90. A cosmetics company offers incentives to its retailers for advertising its new shampoo by placing it in a
special display unit near the billing counters. This incentive offered by the manufacturer is an example of a
_____.
a.
rebate
b.
promotional allowance
c.
cash discount
d.
trade-in
91. _____ pricing occurs when a company offers two or more complementary products and sells them for a
single price.
a.
Psychological
b.
Bundle
c.
Protective
d.
Combination
92. Which of the following pricing systems is sometimes referred to as postage-stamp pricing since it resembles
the pricing structure for mail service?
a.
Zone pricing
b.
Freight absorption pricing
c.
Uniform-delivered pricing
d.
The basing-point system
93. The manufacturer of safety wallets is determining the retail price to charge for each unit sold. Which
approach should the manufacturer use that supports the psychological pricing strategy?
a.
set the price at $24.97
b.
set the price at $25.00 for the first item and $5 for the second
c.
set the price according to the number of unrelated products sold
d.
set the price according to the number of variations of the wallet style
e.
set the first unit sold at full price and the second purchased at half price
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94. A Swedish telephone maker transfers phones costing $10 to produce to its U.S. subsidiary for a transfer
price of $20. The U.S. subsidiary sells the phones to retailers for $25 each and spends $5 per phone in
promotion and distribution expense. The U.S. subsidiary:
a.
makes $10, on which it pays U.S. taxes.
b.
makes $15, all of which is taxable in the United States.
c.
breaks even on the deal because it spends all its revenues.
d.
makes a total of $25 on the deal because the phones are effectively free.
95. A credit allowance given for a used item when a customer purchases a new item is known as a _____.
a.
rebate
b.
trade-in
c.
functional discount
d.
cash discount
96. A smartphone manufacturer introduced a new device into the marketplace with pricing set according to the
skimming approach. The CEO of the company reviews financial reports from the device and notes that the
pricing approach used is not cost-effective for the company. How should the CEO adjust the pricing strategy for
this device?
a.
drop the price
b.
increase the price
c.
offer an everyday low price option
d.
remarket the device under a private label
e.
match the price to the competitions’ price
97. A(n) _____ is a general guideline that reflects marketing objectives and influences specific pricing
decisions.
a.
MAP
b.
pricing policy
c.
leader pricing strategy
d.
EDLP
98. The manager of an electronics and appliance store is challenged by the corporate office to increase the use of
repair and replacement policies for these products. Which approach should the manager consider to meet the
corporate office’s expectation?
a.
increase the price of the policies until the market adjusts
b.
install shop bots for customers to research product policies
c.
bundle the repair and replacement policies as part of the sale price of the products
d.
strategize for new product policies to be introduced alongside high-volume sale items
e.
reduce the prices of popularly sold items and charge a higher fee for the repair policies
99. A firm that manufactures TVs sells them at prices of $750, $1,000, and $1,250. The manufacturer will return
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$75, $100, or $125 respectively, by mail, to those who purchase its brand of TV. This reduction in price is an
example of a:
a.
promotion allowance.
b.
trade-in.
c.
rebate.
d.
quantity discount.
100. Marketers offer rebates in order to:
a.
cover the costs spent by the retailers on advertising the products.
b.
reward the retailer for prompt payment of bills.
c.
reward a retailer who agrees not to advertise products below set prices.
d.
reduce the price paid for a product by customers.
101. Lenovo is developing a new tablet computer that they believe will revolutionize mobile computing. Since
the company believes there is little direct competition for this new product, they plan to set a high price in
comparison to other computer models. Lenovo is using a _____ pricing strategy.
a.
skimming
b.
market-minus
c.
penetration
d.
competitive
102. A refund of a portion of the purchase price usually granted by the product’s manufacturer to consumers is
known as a _____.
a.
cash discount
b.
rebate
c.
functional discount
d.
trade-in
103. When a manufacturer quotes the same price for goods (including freight charges) to a buyer in Miami,
another in Los Angeles, and a third in Dallas, the seller is quoting a _____ price.
a.
uniform-delivered
b.
destination
c.
zone
d.
basing-point
104. A _____ pricing strategy makes more flexible arrangements, compared to other strategies, to set prices
according to local marketplace conditions.
a.
standard
b.
product-line
c.
market-differentiated
d.
dual
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105. In a recent special promotion, any customer who brought in a toaster oven, working or not, was given a $50
credit toward the purchase of a new microwave oven. This is an example of a:
a.
functional discount.
b.
promotional allowance.
c.
cash discount.
d.
trade-in.
106. ADS stores, a supermarket chain, receives discounts from its suppliers for the bulk purchases of the
merchandise at its stores. This is an example of a _____ discount.
a.
cash
b.
trade
c.
quantity
d.
functional
107. Which of the following pricing approaches is best suited for a company that is expanding into the global
market and will be facing rather low foreign marketing costs?
a.
Standard worldwide price
b.
Dual pricing
c.
Market-differentiated pricing
d.
Transfer pricing
108. A one-time reduction in list price typically offered at the time of sale is referred to as a(n):
a.
allowance.
b.
rebate.
c.
cumulative discount.
d.
noncumulative discount.
109. A manufacturer is prepared to introduce a new hair care product for exclusive use in hair salons and spas.
In determining the discount to apply to the product, which strategy indicates that the manufacturer applied a
trade discount legally?
a.
owners of female hair salons receive a 10% higher discount
b.
retailers of hair care products for men and women receive the same discount
c.
wholesalers of hair care products for female salons have a 5% cash-back bonus
d.
retailers receive an additional case of product for every 100 units purchased the first week
e.
wholesalers of hair care products for barber shops receive the same discount as retail outlets
110. The customer service department of a vitamin and nutritional supplement company has been receiving an
increase in customer complaints since the company changed the shipping and handling charges to be the same
amount for every order. Which delivery pricing method is this company using?
a.
zone
b.
basing point
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c.
free on board
d.
uniform delivered
e.
cumulative quantity
111. Many government and organizational procurement departments do not pay set prices for their purchases.
Instead, they:
a.
always negotiate with favored suppliers to get exactly what they want.
b.
approach the supplying industry and get an average estimate of price from all producers.
c.
determine the lowest prices available for items that meet specifications through competitive bidding.
d.
call the federal supply agency and place an order with this government-run factory.
112. Kelly is planning a spring break trip and checking the prices of hotels in Daytona, Florida. She visits the
website Hotels.com to do a search and is also shown prices from several other travel websites. Hotels.com is
utilizing ________ to allow its online shoppers to compare prices.
a.
shopbots
b.
robots
c.
web crawlers
d.
cookies
113. Which of the following pricing strategies tries to reduce the emphasis on price as a competitive weapon?
a.
Penetration pricing
b.
Everyday low pricing
c.
Skimming pricing
d.
Competitive pricing
114. A _____ is the amount by which the average transportation charge exceeds the actual cost of shipping.
a.
rebate
b.
list price
c.
phantom freight
d.
transfer price
115. When the price of Cheerios cereal is displayed as 14.7 cents per ounce, this is an example of _____ pricing.
a.
odd
b.
commodity
c.
unit
d.
penetration
116. Which of the following is true of promotional pricing?
a.
It promotes goods and services at specific price ranges based on the belief that certain prices are more
appealing to consumers.
b.
It uses lower-than-normal price as a temporary component in the selling strategy.
c.
It sets a high price for products that offer unique potential ability.
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d.
It uses extensive promotional allowances to get channel members to promote the product.
117. Makson’s, a manufacturer of agricultural fertilizers and pesticides, modifies the prices of its products
exported to foreign markets to include the marketing costs in foreign markets but maintains the same price in all
its domestic markets. Its products are more expensive in international markets compared to its domestic market
where it is sold at a lower price. This pricing strategy used by Makson’s to differently price its products is
known as:
a.
market-differentiated pricing.
b.
competitive pricing.
c.
dual pricing.
d.
standard worldwide pricing.
118. Dish Network has recently advertised a bundled package of 50 channels plus Internet for $59.99 per month
but in the fine print, the advertisement notes that this offer is applicable for new subscribers only. What type of
pricing policy is Dish Network using with this promotion?
a.
promotional pricing
b.
odd pricing
c.
penetration pricing
d.
flexible pricing
119. Brenda is shopping for mouth wash and is trying to compare prices of the popular Listerine brand to the
Walgreens brand. However, the sizes of the containers are different. The Listerine brand is 48 ounces while the
Walgreens brand is 74 ounces. Fortunately, shelf tags under each product display the per-ounce price so that
Brenda can easily determine which product is less expensive. What type of pricing is included on the shelf tag?
a.
unit pricing
b.
odd pricing
c.
even pricing
d.
penetration pricing
120. Which of the following is a disadvantage associated with product-line pricing?
a.
It does not provide flexibility for making price changes on individual items.
b.
It results in consumers having difficulty in making purchase decisions.
c.
It is ineffective in differentiating between products.
d.
It does not allow shoppers to choose desired price ranges.
121. Burlan Paints, manufacturer of paints for both interiors and exteriors, prices its products differently in
various international markets to suit the requirements of local customers. Burlan Paints is implementing the
_____ pricing strategy for pricing products.
a.
dual
b.
standard
c.
zone
d.
market-differentiated
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122. The price normally quoted to potential buyers before any discounts or allowances are allowed is called the
_____ price.
a.
market
b.
list
c.
cash
d.
trade
123. Perfect Digitals offers a UV lens and a sun protection cover for its camera lens for a wide range of its
digital cameras, all at a single price. This strategy used by the company is referred to as:
a.
unit pricing.
b.
price flexibility policy.
c.
bundle pricing.
d.
competitive pricing.
124. The chief financial officer (CFO) of an automotive manufacturer is reviewing the revenue earned from the
sale of all-terrain vehicles in South America. Because the selling price of the vehicles has been changed
frequently, the CFO wanted to analyze the impact of these changes particularly during the rainy season. Which
global pricing strategy is being used to price these vehicles?
a.
dual
b.
standard
c.
transfer
d.
cannibalization
e.
market-differentiated
125. Which of the following is an example of a rebate offered to buyers?
a.
Getting $25 off a $100 purchase on exchange of a used product.
b.
Getting $3 off a $100 purchase for paying the bill within 10 days.
c.
Getting $5 returned by mail after a $100 purchase for making the purchase.
d.
Getting $100 off a $1,000 purchase for buying in bulk quantities.
126. Which of the following is a major disadvantage associated with the skimming pricing strategy?
a.
It is not effective for higher-end goods.
b.
It is not effective in recovering the high research and development costs.
c.
It attracts competition as potential competitors enter into the market observing the high financial
returns obtained by innovative firms.
d.
It leads to fulfillment problems if the demand for the product outstrips the firm’s production capacity.
127. A _____ pricing strategy helps manufacturers to distinguish their high-end products from similar products
of their competitors.
a.
skimming
b.
market share
c.
competitive
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d.
penetration
128. A newly opened seafood restaurant advertises various deals on meal packages and special prices on dinner
packages to attract customers. This is an example of _____ pricing.
a.
leader
b.
promotional
c.
competitive
d.
list
129. The process by which buyers ask a number of potential suppliers to submit price quotes on a proposed
purchase or contract, of which the lowest will be accepted, is called:
a.
specification.
b.
competitive bidding.
c.
noncompetitive bidding.
d.
competitive pricing.
130. An office supply wholesaler offers a 15 percent discount for retailers who purchase goods worth $ 20,000
over a period of nine months and a 20 percent discount for purchases worth $ 25,000 during the same time
period. This is an example of a _____ discount.
a.
trade
b.
noncumulative quantity
c.
cumulative quantity
d.
recurring
131. A car manufacturer has developed different models of a car to suit the pricing needs of different classes of
customers. It offers a low-end version for price conscious customers and luxury cars for high-end customers.
This is an example of _____ pricing.
a.
promotional
b.
psychological
c.
leader
d.
product-line
132. Paisley Lane Soaps recently contracted with a chain of grocery stores to provide organic bar soap to the
chain. These volume orders are the company's first commercial venture as they have primarily sold directly to
consumers. Typically, Paisley Lane Soaps charges $6 per bar of soap but has contracted with the grocery store
chain for $3.50 per bar. In addition, Paisley Lane Soaps has negotiated a 2% discount on the order if the
grocery store chain pays in full within 10 days of product delivery. This practice is called:
a.
cash discounts
b.
promotional allowances
c.
noncumulative quantity discounts
d.
trade discounts
133. Komatsu is a global firm known for its earth moving equipment utilized in construction. Since its products
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are sold around the globe, Komatsu has developed a unique approach to pricing where prices are set according
to the market conditions within each geographic region. For example, an excavator might be significantly less
expensive in India than in the United States in order to reflect the local marketplace conditions. What type of
pricing strategy is Komatsu utilizing?
a.
market-differentiated pricing
b.
standard worldwide pricing
c.
dual pricing
d.
competitive pricing
134. Everyday low pricing is a strategy devoted to continuous low prices as opposed to:
a.
seasonal changes in prices based on current demand.
b.
purely cost-based prices that vary as the manufacturer’s costs vary.
c.
relying on short-term price-cutting tactics such as cents-off coupons, rebates, and special sales.
d.
prices that are set on a weekly or monthly basis in reaction to competitors’ actions.
135. A flooring manufacturer has experienced an increase in sales of laminate flooring in the stores located in
the southeastern region of the United States. A recent marketing plan identifies that cork flooring will be
introduced in the same stores before rolling out to the rest of the country. What effect is this manufacturer at
risk of experiencing with this strategy?
a.
shop bot
b.
bundling
c.
price fixing
d.
dual pricing
e.
cannibalization
136. _____ pricing is a pricing policy in which products are offered to consumers at less than cost to attract
them to stores in the hope that they will buy other merchandise at regular prices.
a.
Skimming
b.
Loss leader
c.
Odd
d.
Variable
137. The United States Internal Revenue Service is seeking to purchase new desk-top computers for their offices
in Washington, DC. They publish a request for proposals which includes the specifications they are seeking
regarding the number of units, processing speed, size of hard drive space and monitor size and invite companies
to submit proposals. The company with the lowest price will be awarded the contract. This is an example of
a.
competitive bidding
b.
negotiated procurement
c.
blind purchasing
d.
government bidding
138. If a manufacturer offered an intermediary a percentage discount off the list price of products it handled in
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exchange for performing certain wholesaling activities, this would be classified as a:
a.
cash rebate.
b.
list price.
c.
cumulative discount.
d.
trade discount.
139. A committee of city council members is searching for a new vendor for trash and recyclables removal in
the community. Which mechanism provides the committee with information about the prices vendors charge to
perform this service?
a.
leader bidding
b.
negotiated bidding
c.
product-line bidding
d.
promotional bidding
e.
competitive bidding
140. A pricing policy that assumes that some prices are more appealing than others is known as _____ pricing.
a.
leader
b.
product-line
c.
psychological
d.
prestige
141. Transfer pricing becomes especially complex when the global market is involved because:
a.
shipping materials across national lines involves payment of duties and taxes, and these become part
of the total price of the goods.
b.
issues of quality control can be serious, even when divisions of the same firm are involved.
c.
a firm with activities in several countries can use transfer pricing as a tax-avoidance device and
governments frown upon such activities.
d.
the temperature and humidity differences between origins and destinations often damage the
products.
142. The price reduction offered to a customer, business user, or marketing intermediary in return for prompt
payment of a bill is called a _____ discount.
a.
functional
b.
trade
c.
quantity
d.
cash
143. The payment offered to a channel member for performing marketing functions is called a _____.
a.
cash discount
b.
trade discount
c.
quantity discount
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d.
rebate
144. Large-scale enterprises often have a dilemma with setting the _____ price, which is the price they charge
themselves when sending goods from one company profit center to another.
a.
list
b.
transfer
c.
removal
d.
basing
145. The practice of marketing merchandise at a limited number of prices is called _____ pricing.
a.
product-line
b.
odd
c.
one-price
d.
unit
146. Online marketers run the risk of cannibalization when they:
a.
compete with off-price houses on the Internet.
b.
differently price the same products sold in their retail outlets to be sold online.
c.
construct new stores alongside their websites.
d.
hold on to tradition in the face of new technology.
147. Which of the following pricing policies is more likely to be applied in marketing programs based on
individual bargaining?
a.
Product-line pricing
b.
Promotional pricing
c.
Price flexibility
d.
Odd pricing
148. For the purpose of transfer pricing, any part of the organization to which revenue and controllable costs can
be assigned, such as a department, is referred to as a:
a.
sales department.
b.
revenue center.
c.
controllable costs center.
d.
profit center.
149. You work in the procurement department of a large hospital. While training a new assistant, you realize that he has
limited knowledge of competitive bidding, the major purchasing procedure you use. Choose the key point(s) you must
convey to him.
a.
When we need surgical supplies, we advertise the price we want to pay in medical journals.
b.
Before soliciting bids for surgical supplies, we develop detailed specifications for the items we want to buy.
c.
After receiving bids for surgical supplies, we develop detailed specifications of the items that vendors can
offer.
d.
It is illegal for a hospital to negotiate contracts with favored suppliers.
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e.
It is helpful to develop accurate specifications, but this is not a key procurement task.
150. A multi-hospital healthcare system is considering using each facility’s clinical laboratory to run the routine
drug screening of new employees instead of outsourcing the laboratory function to an independent vendor.
What should the healthcare system’s senior leadership consider before implementing this change?
a.
the scope of drug screening each laboratory can perform
b.
the amount of time employees will be absent from the work site
c.
the fee to charge each profit center for the employees’ laboratory work
d.
inviting each laboratory to submit a bid for the cost of the laboratory work
e.
awarding the work to the laboratory with the highest fee to promote prestige among the employees
151. The price a consumer or marketing intermediary actually pays for a product after subtracting any discounts,
allowances, or rebates from the list price is called _____ price.
a.
retail
b.
market
c.
functional
d.
sticker
152. A price quotation system that allows the buyer to deduct shipping expenses from the cost of purchases is
known as _____ pricing.
a.
uniform-delivered
b.
basing-point
c.
freight absorption
d.
FOB plant
153. While stocking the shelves with a new soup, the store manager notes a difference in price between the 16-
ounce can and the 32-ounce can. Which type of pricing strategy is the soup manufacturer using?
a.
unit pricing
b.
odd pricing
c.
price flexibility
d.
promotional pricing
e.
product-line pricing
154. A skimming pricing strategy is more commonly used by firms to:
a.
reduce the raised prices of products to the original level.
b.
set a market-entry price for distinctive goods or services with little or no initial competition.
c.
set a relatively low price for a product when they enter new markets characterized by dozens of
competing brands.
d.
set stable wholesale prices that undercut offers competitors make to retailers.
155. “Buy three shock absorbers and get the fourth free,” as advertised by an auto repair shop, is an example of
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_____ pricing.
a.
unit
b.
variable
c.
promotional
d.
product-line
156. A manufacturer of sports shoes received an order to export 50,000 units to Brazil. Which pricing approach
should the manufacturer use so that the cost of exporting is paid by the receiving country?
a.
set one worldwide price to charge the receiving country
b.
determine the price minus the cost of shipping to the receiving country
c.
establish the price according to the cost of manufacturing plus shipping
d.
recommend a price that can fluctuate depending upon the receiving country’s market
e.
negotiate the price to be a percentage of sales plus the cost of shipping to the receiving country
157. Consumers today perceive that, within price limits, there is:
a.
a need for discounts and incentives.
b.
obvious opportunity for psychological pricing.
c.
a direct relationship between the quality and price of a product.
d.
no perceivable difference in major product brands.
158. The use of bots to search out price quotes on specified products forces Internet marketers to:
a.
keep their prices low.
b.
install “bot-stoppers.”
c.
use printer-disabling viruses.
d.
close their websites.
159. The owner of an exclusive woman’s clothing and accessory boutique receives a shipment of Dolce &
Gabbana chain link and leather belts. Which approach indicates that the owner used consumer price-quality
perception when pricing the belts?
a.
belts priced at $250 each and draped over slacks
b.
belts priced at $25 each and displayed at the cash register
c.
belts priced at $100 each and placed next to matching purses
d.
belts priced at $1000 each and displayed behind an acrylic glass display case
e.
belts priced at $500 each and threaded through slacks with matching jackets
160. When General Motors introduced the Saturn, it priced the SL sports sedan at $2,000 less than the Toyota
Corolla DLX and $1,500 less than comparable Nissan and Honda automobiles. This is an example of the _____
pricing strategy.
a.
skimming
b.
penetration
c.
competitive
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d.
leader
161. In order to recover research and development costs rapidly and earn high initial profits, SenseTV is setting
a high price for its plasma TVs. The pricing strategy SenseTV is using is called _____ pricing strategy.
a.
market-minus
b.
skimming
c.
penetration
d.
competitive
162. Consumers have a certain range within which their product-quality perceptions vary directly with price.
This range reflects the concept of price:
a.
limits.
b.
variations.
c.
controls.
d.
resistance.
163. A major problem facing company decision makers when setting transfer prices is:
a.
how to determine the product-service attributes of the transfer.
b.
when to complete the transfer.
c.
how to assign the controllable costs to the profit centers.
d.
what price to actually charge the receiving profit center.
164. Which of the following statements best describes allowances?
a.
Allowances are used in conjunction with quantity and cash discounts.
b.
Allowances are the same as transfer prices.
c.
Allowances are offered only to marketing channel members in order to increase sales.
d.
Allowances result in reduction of the list price quoted on a product.
165. Since it involves the use of a high price relative to prices of competing products or services, the skimming
pricing strategy is sometimes referred to as _____ pricing.
a.
penetration
b.
competitive
c.
market-plus
d.
functional
166. The global pricing strategy that allows the greatest flexibility in setting prices to reflect local marketplace
conditions is:
a.
standard worldwide pricing.
b.
dual pricing.
c.
market-differentiated pricing.
d.
everyday low pricing.
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167. Sherwin Williams develops strong relationships with contractors and facility managers to develop loyalty
and encourage them to purchase a majority of their paint and supplies from the store. Sherwin Williams
provides incentives to contractors and bases prices according to the volume of paint a contractor purchases
within a given quarter. Sherwin Williams includes the cumulative volume purchased on each invoice so each
contractor can track their purchases and estimate the amount of rebate or refund they could earn at the end of
each quarter. Sherwin Williams is utilizing a(n):
a.
cumulative quantity discounts
b.
trade discount
c.
promotional allowance
d.
cash discount
168. Firms with high fixed costs often expand their markets, quoting the same prices to all customers regardless
of shipping expenses, under the plan called:
a.
zone pricing.
b.
freight absorption pricing.
c.
uniform-delivered pricing.
d.
the basing-point system.
169. A penetration pricing strategy is called _____ pricing when it implements the premise that a lower-than-
market price will attract buyers and move a brand from an unknown newcomer to brand-recognition or brand-
preference stage.
a.
market-plus
b.
market-minus
c.
EDLP
d.
FOB
170. In the absence of other cues:
a.
many buyers interpret low prices as signals of high-quality products.
b.
price offers no clue of a product's quality to prospective purchasers.
c.
price is an important indicator of product quality to consumers.
d.
the relationship between price and quality holds true only in declining economies.
171. An example of odd pricing would be:
a.
a buy-two-get-one-free promotion.
b.
selling a radar detector for $129.99 instead of $130.
c.
subtracting trade-ins from the list price.
d.
rebates that lower total price.
172. If foreign marketing costs are so low they do not impact overall costs, the pricing strategy to recommend is:
a.
promotional pricing.
b.
dual pricing.
c.
market-differentiated pricing.
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d.
standard worldwide pricing.
173. Charles Schwab, an equity investment company, will face the risk of cannibalization from its e-tail channel,
Schwab.com, if:
a.
it attempts to lure customers within the Schwab database.
b.
it branches out into mutual funds and tax-deferred investments.
c.
it makes price cuts and creates competition with the parent company.
d.
it allots all its best personnel to work at the online firm.
174. Which of the following is one of the most important aspects of a government or organizational
procurement?
a.
The bidder’s profit on the product
b.
The payment schedule for the product
c.
Provisions for deflation or inflation
d.
Development of accurate descriptions of products to buy.
175. Which of the following pricing policies began to be widely used during the late 1960s to make price
comparisons more convenient between products packaged in different sizes?
a.
Odd pricing
b.
Promotional pricing
c.
Unit pricing
d.
Product-line pricing
176. Oscar Mayer has recently developed a new snack product that's targeted to kids and young adults as a
healthy, protein-based after-school or pre-dinner snack. They expect the product to complement their
Lunchables product line and appeal to teen-age or college-age consumers who think of Lunchables as just for
younger kids. In order to promote product trial and subsequent adoption, the company plans to use a relatively
low entry price compared to the competition. What type of pricing strategy does Oscar Mayer plan to utilize?
a.
penetration
b.
everyday low pricing
c.
skimming
d.
competitive pricing
177. Before a multi-state computer company can charge for onsite computer repairs for the business’s computer
equipment, the company needs to establish __________.
a.
cost centers
b.
terms of service
c.
negotiated prices
d.
auction accounts
e.
market-plus pricing
178. Any part of an organization to which revenue and controllable costs can be assigned is termed a(n):
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a.
profit center
b.
business entity
c.
small business unit
d.
division
179. Aken Laboratories, a chemical manufacturer, exports its products to various countries in Asia. The
company does not alter the prices of its products in these countries. Aken is adopting a _____ pricing strategy.
a.
market-differentiated
b.
variable
c.
standard worldwide
d.
dual
180. A retailer wants to increase the number of customers shopping in her store. Which of the following has the
greatest potential for success?
a.
Promotional pricing
b.
Price flexibility
c.
Prestige pricing
d.
Unit pricing
181. Which of the following is true of products priced as “FOB origin”?
a.
The purchase of these products permits the buyers to subtract transportation expenses from their bills.
b.
The transportation costs of these products are uniformly distributed among all channel members
including the final purchaser.
c.
The legal title and responsibility of these products lies with the seller until it is delivered to the buyer.
d.
The buyer pays all the freight charges to transport the product from the manufacturer’s loading dock.
182. A promotional allowance is an incentive offered by manufacturers to retailers to:
a.
reward a retailer for not advertising a product below a certain price.
b.
provide one-time reductions in the list price of products for purchasers of large quantities.
c.
refund the shipping costs paid by the retailer for home-delivery of products.
d.
return a certain amount spent by the retailers on advertising and providing sales support.
183. Retailers such as Home Depot and Lowe’s, who offer to meet and beat the best price offered by their
competitors, use the strategy of _____ pricing.
a.
skimming
b.
penetration
c.
competitive
d.
cost-plus
184. Penetration pricing works best for goods or services:
a.
that offer a unique advantage over competitors’ brands.
b.
that are characterized by highly elastic demand.
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c.
that face little or no competition in the market place.
d.
that involve high production and operational costs.
185. _____ pricing is the pricing strategy of continuously offering low prices rather than relying on short-term
price-cutting tactics such as cents-off coupons, rebates, and special sales.
a.
Minimum advertised
b.
Skimming
c.
Everyday low
d.
Competitive
186. The manager of a retail furniture store desires to increase the number of prestige sales of pieces handcrafted
from natural materials. Which strategy should the manager use to meet this sales objective?
a.
place the pieces near the main entrance for customers to see first
b.
identify an area near the cash registers where the pieces are displayed
c.
stage an area on the floor in each room highlighting the pieces and their uses
d.
place a sign on the door advertising environmentally friendly furniture for sale
e.
provide customers with a marketing piece explaining the materials used to make the items
187. A negative cash discount is used by a seller to:
a.
reduce prices on a one-time-only basis.
b.
improve its liquidity position and cut collection expenses.
c.
return the costs incurred by channel members in performing marketing functions.
d.
reduce prices in an attempt to integrate promotional strategies within distribution channels.
188. When a men’s clothing store sells suits at four price levels ($295, $455, $525, $650), the store’s retail
policy is _____ pricing.
a.
unit
b.
promotional
c.
product-line
d.
psychological
189. The manager of the Indianapolis Motor Speedway notices that sales are down for the next upcoming race.
Which approach should the manager use to sell the remaining tickets for the next event quickly?
a.
drop the price of general admission tickets one week prior to the event
b.
advertise that the Motor Speedway is a green facility and restricts smoking
c.
offer general admission tickets as buy one, get one 50% off the regular price
d.
place the tickets on an auction website and invite individuals to bid on open seats
e.
bundle open tickets with such incentives as drink tickets or reduced-rate parking
190. Buyers and sellers often set purchase terms using negotiated contracts when:
a.
only one supplier offers the desired product.
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b.
there are multiple interested parties.
c.
research and development work is not necessary.
d.
purchases exceed $5,000.
191. Psychological pricing is based on the premise that:
a.
certain prices or price ranges make products more appealing to buyers than others.
b.
one-price policies appeal to most people and suit mass-marketing programs.
c.
setting a limited number of prices for a selection of merchandise has a certain appeal.
d.
lower-than-normal prices as part of recurring marketing initiatives creates demand.
192. _____ pricing refers to a pricing strategy in which marketers offer prices slightly above cost to avoid
violating minimum-markup regulations and to earn a minimal return on promotional sales.
a.
Competitive
b.
Leader
c.
Penetration
d.
Psychological
193. A _____ pricing strategy permits marketers to control demand in the introductory stages of a product’s life
cycle and then adjust productive capacity to match changing demand.
a.
penetration
b.
value-added
c.
skimming
d.
competitive
Indicate one or more answer choices that best complete the statement or answer the question.
194. You are in charge of developing profit centers for a new chain of waterside resorts. These will include restaurants,
spas, and marinas. To ensure the proper use of transfer pricing within the organization, the company accountant has
provided a list of relevant questions for you to answer. Which of the following questions appear(s) on her list?
a.
What rate should be charged by restaurant cleaning crews to mop the floors in the spas?
b.
Should the spas charge resort employees who use its facilities the same access fee charged to guests?
c.
When the restaurants rent boats for special dinners, what rental rate should be charged by the marinas?
d.
When resort employees eat in the restaurants, should they pay the same menu prices as guests?
e.
Only questions b and d appear on her list.
195. You just opened a retail pet supply store, and have decided to use a penetration pricing strategy. A potential investor,
however, is dismayed by your decision. To win her over, which of the following points should you make?
a.
Demand for pet supplies is highly elastic.
b.
Demand for pet supplies is highly inelastic.
c.
A new store needs to focus on attracting shoppers.
d.
Market-minus pricing would be inappropriate in the pet supply market.
e.
The new store's introductory prices can be changed later in its life cycle.
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196. Samantha offers special discounts for customers who order her jewelry online instead of buying it at her shop in the
mall. Her business partner, Julie, challenges this approach. What point(s) does Julie make?
a.
Samantha is creating unhealthy competition among the company's own products.
b.
The general trend in marketing is to standardize pricing across channels.
c.
Online discounts will undermine the brand image more than in-store discounts.
d.
Few jewelry buyers are multichannel shoppers.
e.
The most profitable retailers are those that focus on luring buyers to their physical stores.
197. Betty is convinced that certain prices will boost sales of her gourmet chocolates more than other prices. Which of the
following price policies could she apply?
a.
Prestige pricing.
b.
Elastic pricing.
c.
Non-behavioral pricing.
d.
Odd pricing.
e.
Unit pricing.
198. Don intends to use promotional pricing as an ongoing part of the marketing strategy for his automotive supply store.
Because you are his friend -- and have years of experience in retail marketing -- you feel obligated to tell Don that he
should rethink this plan. What point(s) do you make?
a.
Overuse of promotional pricing can get customers hooked on lower-than-normal prices.
b.
Promotional pricing is intended to be a temporary part of a firm's marketing strategy, not an ongoing element.
c.
Promotional pricing will require Don to use popular products like motor oil as loss leaders.
d.
Promotional pricing only works when implemented together with psychological pricing techniques.
e.
Promotional pricing is seldom used by retailers.
199. Tulip World exports flowers around the globe, using standard worldwide prices. But its marketing director realizes
that the success of this pricing strategy could be undermined by certain market changes. Choose the change(s) he has in
mind.
a.
Domestic tulip suppliers undercut Tulip World's prices.
b.
New trade restrictions are imposed in some of the countries where the firm does business.
c.
Foreign marketing costs rise significantly.
d.
Tulip World's prices no longer reflect its unit export costs.
e.
Tulip World switches to a new distribution system.
200. Jim plans to rent a car during an upcoming business trip to Dallas. He expects to pay a rental rate similar to what he
was charged last year in the same city. However, he could be persuaded to pay more under certain conditions. Which of
the following conditions might influence Jim to pay more?
a.
He is offered an eco-friendly hybrid car.
b.
He is offered a Range Rover or other top quality car at only a small premium.
c.
He is offered the same car he drove last year.
d.
He is offered the option of paying in installments.
201. The travel agency business is more competitive than ever because of industry consolidation and the growth of online
services. Still, Sam believes his cruise booking agency can be profitable if he targets organizations that book tickets for
member events -- and if he makes careful use of price discounts. Which of the following steps is Sam likely to take?
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a.
Offer cash discounts to organizations that pay their bills within 30 days.
b.
Offer cash discounts to organizations that pay for tickets at any time in cash.
c.
Offer one-time only cumulative quantity discounts to organizations buying the largest number of tickets for a
given cruise.
d.
Offer cumulative quantity discounts for organizations making annual bookings over $10,000.
e.
Eliminate list prices.
202. As Chief Marketing Officer for a pharmaceutical company, you’ve chosen to use a skimming pricing strategy when
introducing the firm’s breakthrough pain medication. Nervous about charging high prices during an economic downturn,
the CEO wants you to explain your choice to the board of directors. What should you say?
a.
Skimming pricing strategy is generally more successful than market-plus pricing strategy.
b.
If other drug companies introduce competitive products, your initial high price will be dropped.
c.
Skimming allows the firm to quickly recoup its research and development costs.
d.
Skimming allows the firm to control demand during the medication’s introductory stages.
e.
Skimming discourages competition.
Match each item with the correct statement below.
a.
competitive bidding
b.
penetration pricing strategy
c.
list price
d.
trade discount
e.
price flexibility
f.
promotional pricing
g.
loss leader
h.
cannibalization
i.
bundle pricing
j.
odd pricing
k.
transfer price
l.
profit center
m.
skimming pricing strategy
n.
competitive pricing strategy
o.
pricing policy
p.
market price
q.
noncumulative quantity discount
r.
step out
s.
bot
t.
cash discount
203. A(n) _____ involves the use of a high price relative to competitive offerings.
204. A(n) _____ is a pricing practice in which a firm raises prices and then wait to see if others follow suit.
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205. The strategy of using a relative low entry price compared with competitive offerings to secure market
acceptance is called a(n) _____.
206. A(n) _____ is designed to deemphasize price as a competitive variable by pricing a good or service at the
level of comparable offerings.
207. A(n) _____ is a price reduction offered to a consumer or a business buyer in return for prompt payment of a
bill.
208. A(n) _____ is a payment to a channel member or buyer for performing marketing functions.
209. The price normally quoted to potential buyers is called _____.
210. The amount a consumer actually pays for a product is called _____.
211. The price reduction granted on a one-time-only basis is called a(n) _____.
212. A(n) _____ is a general guideline that reflects marketing objectives and influences specific pricing
decisions.
213. _____ is a pricing policy permitting variable services for goods and services.
214. A price of $9.99 is an example of _____.
215. The pricing policy in which a lower-than-normal price is used as a temporary ingredient in a firm’s
marketing strategy is called _____.
216. A product offered to consumers at less than cost to attract them to stores in the hope that they will buy
other merchandise at regular prices is called a(n) _____.
217. The process of inviting potential suppliers to quote prices on proposed purchases or contracts is known as
_____.
218. A(n) _____ is a part of an organization to which revenue and controllable costs can be assigned.
219. The cost assessed when a product is moved from one profit center within a firm to another is called _____.
220. _____ is the loss of sales of an existing product due to competition from a new product in the same line.
221. Offering a printer along with a personal computer at a single price is an example of _____.
222. A(n) _____ is a software program that allows online shoppers to compare prices of a particular product
offered by several online retailers.
223. What are allowances? What are the major categories of allowances?
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224. Discuss the four major types of pricing policies, as well as flexible alternatives.
225. What are the disadvantages of promotional pricing?
226. What is market-plus pricing? Why do companies practice a skimming strategy?
227. Explain everyday low pricing.
228. Discuss the relationship between price and consumer perceptions of quality.
229. Compare and contrast competitive bidding and negotiated prices.
230. What are the different factors that influence global pricing strategies?
231. Discuss the benefits a company receives when following a skimming pricing strategy.
232. What is the importance of transfer pricing? How does it relate to an organization’s profit center?
233. Explain psychological pricing and give three examples of this concept.
234. Discuss the practice of promotional pricing and the role played by loss leaders and leader pricing.
235. Define cannibalization and give an example.
236. How do buyers and sellers handle transportation costs? What are the alternative policies that sellers
implement for handling transportation costs in their pricing policies?
237. What is bundle pricing? Give an example.
238. What is leader pricing? What type of retailers use this strategy?
239. Discuss the three alternative strategies for pricing exports.
240. Differentiate between the list price and market price of a product.
241. What is a bot? How does it influence the online pricing of products?
242. What are the problems associated with product-line pricing?
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chapter 19
Answer Key
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chapter 19
Name:
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chapter 19
Name:
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chapter 19
Name:
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chapter 19
Name:
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chapter 19
Name:
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Date:
chapter 19
Name:
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Date:
chapter 19
Name:
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Date:
chapter 19
Name:
Class:
Date:
chapter 19
Name:
Class:
Date:
chapter 19
Name:
Class:
Date:
chapter 19
Name:
Class:
Date:
chapter 19
